wholesale formula is not fair for distressed seller !

[Gamal Darwish]

if you find a house that ARV 225 k, that you can buy for 155 k and rehab for 25 K, and you have selling cost 15 K ( realtor commission and 3 month holding....) , let us say the total investment amount = 195 K

the net profit = 30 k which is not bad return of 15% in less 3 month from start to sold.

the formula 225 x 70% - 25 k will be the price rehabber want to pay which is 132.5 k which is too little TO SELLER, which sometime leave nothing for the seller to walk away.

what do you think?

[Jon Holdman]

If you pay $155K and have $25K for an all in cost of $180K vs. a $225K ARV you're at 80% of ARV. Commissions and costs on the back end will be about $18K. You will have some purchase closing costs, about $3K and a few other holding costs. That leaves you a potential profit of $24K.

But you're missing a HUGE factor. The cost of money. If you borrow hard money for the bulk of this deal that will costs you about $16K. Now your profit is only $8K. Doesn't take much in the way of mistakes to eat that up.

If you have your own money you could make more. OTOH, if you have that cash you could loan it to a rehabber and make the $16K return with much less risk and effort.

Yes, it is very, very tough to find a seller willing to sell at a low enough price to allow a rehabber to make money. You need a pretty junky house and a really desparate seller.